Legal Question in Real Estate Law in California

The statute of limitations is four years on a policy of title insurance. There are not enough facts to say for sure if you have a cause of action, but it sounds like it.

Suits against title insurers are a sub-sub-specialty in real estate law, and I'll be the first to admit I don't know the answers to your questions, even after several minutes of thought. I do know that claims against the insurance itself are hard to establish and win, but yours would probably be a claim for negligence rather than for an insured loss - not that this improves your chances. You'd have to show that the insurance company owed you a duty to find the documents that fixed the easement's location, and that the neighbor's suit was proximately caused by its negligent failure to carry out its duty professionally. Also, what were your damages? Your legal defense costs, I suppose -- anything else? Maybe another LawGuru attorney has some knowledge of this area.

I would be incredibly wary of the advice given to you by Mr. McCormick. He may never admit that he is wrong, but he should have at least disclosed to you that he was or is in house counsel for Fidelity National Title.

As such Mr. McCormick should have been well aware that the statute of limitations for an action against a title insurer "founded upon" a policy of title insurance is two (2) years. "Within two years ..an action founded upon a contract, obligation or liability, evidenced by a certificate, or abstract or guaranty of title of real property, or by a policy of title insurance." (Code of Civ. Proc., sect. 339 subd. (1).) [If you relied on the four (4) years as claimed by Mr. McCormick, you would have blown the statute of limitations, and the title insurer would be out scot free. Do you see the conflict of interest?]

The insured (you) must file suit within two (2) years of discovering "the potential loss which may be incurred if the title is not as represented in the policy." (65 Butterfield v. Chicago Title Ins. Co. (1999) 70 Cal.App.4th 1047, 1061.)

Mr. Whipple, however, has some valid points as usual. I doubt that you would have a lawsuit for the excepted easement, because it was disclosed to you and excepted. A lawsuit against the title company would involve damages for loss, not damages for being upset because a neighbor sued you over interpretation of an easement that was disclosed to you in an exception to a title policy.

There are other considerations prior to filing suit against at title insurer, such as a contractual obligation (set up by the policy of title insurance) to first file a claim with the insurer. I would not set out blindly on your own, without first consulting with an attorney who knows what he/she is doing in this area of the law.